Risk

Jacob Hacker has a sort of preview of his next book in The New Republic, and I think he is most clearly saying the big thing that needs to be said about the economy: That the principal problem, the big thing that has changed, is not the number of jobs, the rate of growth, or income inequality. It’s the shift in risk from the government and corporations onto individuals.

This is an important point, and one that has been discussed before over at Crooked Timber, but I still strongly believe that inequality itself does matter. In his link to the above article at the Decembrist, Kevin Drum makes the usual case against inequality:

It’s true that the rise in income inequality over the past 30 years has mostly been due to huge gains at the top end, not to declines at the bottom. The average worker may not be much better off than he was in 1973, but he’s not (generally speaking) worse off either.

The thing is, and I don’t know why it is so hard for people to get this point, even if income had risen on the bottom (as it has in some developing nations), the very fact of greater inequality makes life harder for those on the bottom. For instance, if having nice dental work is the norm, then people with bad teeth suddenly find it is much harder to get a promotion. Sure, their teeth aren’t any worse off, but the social norm has shifted as a result of greater wealth at the top.

Having said that, the shift of risk on to individuals is a very disturbing trend. As Kieran Healy puts it:

Treating labor like a commodity is a way to transfer the burden of risk away from businesses and on to workers. In general, CEOs of big corporations do not engage in the kind of risk taking that they typically ascribe to themselves. Or more precisely, there is plenty of evidence that they do not have to suffer the consequences of the risks they take.